What Can this Mean for Brokers?

RE-Insider was the first to question the legality of Fidelty’s TransactionPoint software last year in June. We continued to ask questions in December. And last month, we revealed that Fidelity suspended all payments to brokers made under their Real Estate Service Provider Access Agreements because of potential alleged RESPA violations.

Now HUD has taken decisive action and the title company is on the hook for a whopping $4.5 million in penalties. Fidelity has also agreed to cease certain TransactionPoint practices immediately. Here’s what HUD announced:

The U.S. Department of Housing and Urban Development (HUD) announced an agreement with Fidelity National Financial, Inc. (FNF) to settle allegations the title company paid real estate brokers and other settlement service providers improper kickbacks or referral fees in violation of the Real Estate Settlement Procedures Act (RESPA).

HUD claimed FNF and its affiliates and subsidiaries engaged in a widespread and years-long campaign to pay real estate brokers kickbacks for the referral of real estate settlement services, including home warranties and title insurance. (Read the actual Full Settlement PDF)

“This agreement should be a signal to others that these business practices won’t be tolerated,” said Acting FHA Commissioner Robert Ryan.

Although HUD is settling with Fidelity, it is not granting immunity to the brokers that accepted the kickbacks from TransactionPoint, as far as we can tell.

Where does this leave Fidelity’s brokerage partners? These professionals could face further prosecution from HUD or the Consumer Financial Protection Bureau (CFPB), when they take over RESPA enforcement on July 21.

Did Fidelity tell HUD the names of the brokers who accepted TransactionPoint payments? Will these brokerages have to wait and see which enforcement agency comes after them? RE-Insider ponders if, based on this precedent, individual agents and brokers may be looking at three times the amount received plus damages and attorney fees.

We also have to wonder whether brokers are looking to Fidelity for the legal help and money to cover the damages caused. Did Fidelity say that TransactionPoint access fees were in compliance with RESPA? What is Fidelity saying now?

This may be only the beginning of a nightmare of unimaginable size for the real estate professionals who used the TransactionPoint service and received access fees.

We’d like to hear your thoughts.

Our fears have been confirmed. In a memo dated earlier this month, Fidelity announced that, according to HUD, payments made under Real Estate Service Provider Access Agreements, used in conjunction with the TransactionPoint software, may violate RESPA. Fidelity announced that it has officially suspended all payments in conjunction with the Fidelity Access Agreements as of May 27, 2011. Did Fidelity tell you that payments under the Access Agreements complied with RESPA? If so, it appears that HUD does not agree.

We’ve long been critical of TransactionPoint – see our posts here and here. As early as June 2010, RE-Insider was one of the few publications in the nation investigating the legality of TransactionPoint. Hopefully, our warnings encouraged California brokers to take the next step and independently verify whether the TransactionPoint Access Agreement payments complied with RESPA.

RE-Insider never believed that it was permissible under RESPA for service providers to make payments for orders received through TransactionPoint. We tried numerous times to obtain the name of Fidelity attorneys that endorsed TransactionPoint or find a Fidelity in-house lawyer to go on the record about the legality of TransactionPoint and never received a call back.

Now we’re wondering if any broker received a written, legal opinion by a RESPA attorney assuring that the TransactionPoint “pay-to-play” Access Agreements were RESPA compliant. It is hard to believe that any broker started taking payments without first obtaining a legal opinion that RESPA would not be violated.

The fallout from this could be massive. What happens to the participating brokers now? How bad are the possible legal ramifications for each individually-licensed broker? What will Fidelity do if HUD, the Department of Real Estate or others come after the brokers that received payments under the Access Agreements?

As for the memo itself, we found it quite confusing. While announcing that it is suspending payments because HUD believes the payments may violate RESPA, Fidelity also claims that HUD called TransactionPoint a “valuable tool.” Note that this self-serving memo identifies Steve Murnin as the person to contact if you have any questions. Steve Murnin is the same Fidelity Vice-President that explained the role of Fidelity in marketing TransactionPoint in a court declaration published by RE-Insider (click here) Wow! We have a question for Mr. Murnin – – what is the exposure under RESPA for each broker that received a payment from a service provider under one of the TransactionPoint Access Agreements?

Will brokers continue to accept TransactionPoint Access Agreement payments from other vendors that have not suspended payments? Why would any broker ever consider doing so? We are interested in those brokers’ answers.

How will this situation affect the participants in the TransactionPoint Access Agreements, including brokers, agents, and vendors? Please share your thoughts.

Back in May, RE-Insider wrote about the lawsuit brought against Fidelity and its appraisal arm and asked, “Who’s Next?” Well, last week we got our answer

Last Wednesday, the Federal Deposit Insurance Corp. (FDIC), in its role as receiver for Washington Mutual, filed suit against First American’s eAppraiseIT, citing sloppy appraisals that led to losses of at least several hundred million dollars for WaMu.

The FDIC has now charged divisions of both First American and Fidelity, the two largest title appraisors in the country with grossly overstating the value of certain properties. The FDIC claims that more than 75% of the appraisals that they investigated performed by the two AMCs contained multiple violations of industry standards.

Click here to read more about the FDIC suit and as always, stay tuned to RE-Insider for more details on the lawsuit.